The Iranian president toured the site at Arak, 190km (120 miles) south-west of Tehran.

After inaugurating the heavy water plant, he again said Iran would never abandon its nuclear programme, but that nuclear weapons were not its goal.

"Basically, there is no talk of nuclear weapons," he said. "There is no discussion of nuclear weapons. We are not a threat to anybody, even the Zionist regime which is a definite enemy of the people of the region."

ARAK PROJECT

Located at Khondab, some 190km (120 miles) southwest of Tehran

New plant now produces up to 16t of heavy water per year - Iran wants to produce up to 80t a year

Western diplomats say producing heavy water itself does not violate non-proliferation treaties

Water to be used to cool a new research reactor currently under construction

Reactor will produce plutonium by-product that could be used to make atomic warheads

Reactor expected to be completed by 2009

Source: News agencies and Iranian government

The ceremony comes amid mounting international pressure for Iran to suspend its nuclear programme.

Earlier this week, Iran had offered "serious talks" in response to a package of incentives offered if, by 31 August, it halted uranium enrichment - another possible route to nuclear weapons.

However, the US said suspension of research was required first, echoing French comments. China and Russia said earlier that talks were the only way forward.

Iran could face sanctions if it does not suspend its nuclear programme.

'Bone of contention'

BBC regional analyst Pam O'Toole says the heavy water reactor project at Arak has long been a bone of contention between Iran and some Western governments.

Arak was one of two Iranian nuclear facilities whose existence was revealed by an exiled Iranian opposition group four years ago. At that stage Iran had failed to declare its existence to the UN's nuclear watchdog, the IAEA.

The IAEA later called on Iran to reconsider construction of its heavy water reactor project.